Understanding the basics of bookkeeping

If you're going to run a business, you need to understand bookkeeping. Good budgeting, strong decision-making — these and other essential business tasks all connect back to bookkeeping. So let's run through the basics of bookkeeping so you can start your business on the right foot.

What is bookkeeping?

For a business, it's the process of recording and organising every financial transaction. This includes revenue, expenses, assets, liabilities, equity, cash flow, tax records and so on.

How do you keep track of all this financial information?

There are multiple ways. Tech-savvy professionals may turn to accounting software like QuickBooks, while others may opt to write in journals or ledgers. Likely, several methods will be used to ensure nothing slips through the cracks.

What are the benefits of good bookkeeping?

If you have a strong grasp on your business' finances, you could benefit in the following areas:

• Financial oversight and control: You can better adhere to your budget — or know when you're heading in a dangerous direction — if you have total visibility into your business' finances.
• Smart decision-making: Is it the right time to expand? Or is it time to consider some cuts? Having accurate financial information allows you to make informed decisions about your business' future.
• Regulatory compliance: Running a business is challenging enough on its own. Good bookkeeping ensures you're in compliance with tax laws and regulations. Focus more on making your business a success and less on potential legal issues that result form financial disorganisation.
• Easy resolutions to disputes: In business, you'll work with employees, customers, vendors and others who you may run into conflict with. A well-organised bookkeeping system can help you settle financial disputes with these individuals a little more easily.

Understand bookkeeping terminology

Accrual, accounts receivable, payroll, cost of goods sold — these are just a few of the terms thrown around in bookkeeping. To be good at it, it's important for you to familiarise yourself with all these terms. Here's a list to help get you started.

How WMC Accounting can help

These are just the basics of bookkeeping. If you seek more information, WMC Accounting is ready to help. Contact us to get in touch with our expert business advisors who are ready to help set your business up for success.